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ASYMPTOTIC ANALYSIS FOR PORTFOLIO OPTIMIZATION PROBLEM UNDER TWO-FACTOR HESTON'S STOCHASTIC VOLATILITY MODEL

  • Kim, Jai Heui (Department of Mathematics, Pusan National University) ;
  • Veng, Sotheara (Department of Mathematics, Pusan National University)
  • Received : 2017.11.17
  • Accepted : 2017.12.11
  • Published : 2018.01.31

Abstract

We study an optimization problem for hyperbolic absolute risk aversion (HARA) utility function under two-factor Heston's stochastic volatility model. It is not possible to obtain an explicit solution because our financial market model is complicated. However, by using asymptotic analysis technique, we find the explicit forms of the approximations of the optimal value function and the optimal strategy for HARA utility function.

Keywords

Acknowledgement

Supported by : Pusan National University

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